Mr Price benefits from online exposure

Business News / 28 May 2014, 08:00am

Nompumelelo Magwaza

Johannesburg - Mr Price’s retail sales growth of 14.8 percent in the year to March benefited from new markets elsewhere in Africa and from continued market share gains in South Africa, chief financial executive Mark Blair said yesterday.

“When you look at the overall sales growth, we had very good growth in new markets and new channels,” Blair said. “Overall what has helped us grow our retail sales was that we are growing at 98 percent in Nigeria and Ghana. Plus our online sales, mainly Mr Price and Mr Price Home, is growing by 293 percent.

“In South Africa, Mr Price, which is the main part of our business, gained 1 percent of the apparel market share in the last 12 months.”

Regarding the impact of the political instability in Nigeria on retail businesses, Blair said Mr Price was concerned about the unrest in that country and had taken a decision to limit its business to the southern part of Nigeria.

In South Africa, the group’s retail sales increased 13.4 percent year on year in the 52 weeks to March 29, compared with 7 percent growth in the retail sector. Mr Price believed its target customers, which are mainly in the mid to upper living standard measure (LSM) categories, were less affected by constraints experienced by the lower LSM consumers.

“History is showing that when markets are tight, Mr Price has picked up market share. History has also shown that once we pick up that market share we are able to keep it as times improve,” Blair said.

In the 52 weeks to March 29, Mr Price increased its revenue by 15.2 percent to R15.8 billion, while retail sales grew 14.8 percent to R15.2bn.

Mr Price’s online store, which has been opened up to the globe, has been able to deliver goods to 130 countries.

Blair said the biggest markets for Mr Price’s online store were Australia, New Zealand, the US and UK.

“We have a multi-channel model which gives us access to all the markets. The online system is capable of e-tailing internationally. It allows us to get a good view of our merchandising capabilities in those markets without going through the costly exercise of investing in new stores and signing up leases,” he said.

Mr Price will in future put some marketing efforts into the Australian market.

The retailer will also invest capital of about R2bn in the next three years. “We will do this to protect our market in South Africa, because we still think we can gain more market share in South Africa and another strategy is to grow our market offshore.”

In terms of capital expenditure, Mr Price will open about 60 to 70 stores and will also build another distribution centre, which could cost about R1bn, as well as invest in information technology systems.

Theresa Heath, an analyst at Stanlib Asset Management, said Mr Price’s sales numbers were better than the market’s figures.

She said Mr Price was growing at twice the rate of the overall apparel sales in the retail sector. “I will assume that they have taken market share across the board. Mr Price appeals to a broad range of income groups, but tends to be skewed to the upper end of the market,” she said.

Shares declined 0.9 percent to close at R166.99 yesterday. - Business Report